Art Carden
, ContributorUsing economics to understand the world.Opinions expressed by Forbes Contributors are their own.

American economist James Buchanan won the 1986 Nobel Prize in Economics. (Photo credit: Wikipedia)

One of our age's most important thinkers passed away yesterday. The economist James M. Buchanan won the Nobel Prize in 1986 and was, among other things, a path-breaking intellectual entrepreneur and an inspiration for generations of scholars. He also helped develop a rigorous body of theory and evidence that helps us understand why pleasant political daydreams often create actual social nightmares. Specifically, Buchanan's research agenda was one of "politics without romance," as discussed by Donald J. Boudreaux in today's Wall Street Journal.

In short, Buchanan, along with coauthors like Gordon Tullock, Geoffrey Brennan, Richard Wagner, and others, helped develop a branch of inquiry that helps us understand politics and markets by considering people as they actually are rather than as we can imagine them to be in our visions of a perfect world. He was an exemplar of what the economist Thomas Sowell called "the constrained vision." Human nature was given, not something to be changed. Political actors exhibited this same human nature, and any discussion of political institutions had to take seriously our moral and cognitive limitations as well as the fact that people respond to incentives.

The implications for government are clear. As Boudreaux notes in his Wall Street Journal appreciation, Buchanan saw the fundamental problems of social cooperation as problems of identifying and implementing constraints that would channel self-interest toward socially beneficial results rather than parts of a project of remaking human nature. As I recall the economist Michael Munger saying at a seminar several years ago (and I paraphrase), the question we should ask about a policy is not "what would ideal, perfectly public-spirited leaders do" but "what would actual politicians who actually get elected do?" These questions are parts of Buchanan's formidable intellectual legacy.

Buchanan was extremely prolific, and the interested reader can peruse his works online courtesy of the Library of Economics and Liberty. In spite of his many book-length treatments of fundamental questions in political economy, my favorite piece of the Buchanan canon is his exceptional and exceptionally short essay "Order Defined in the Process of Its Emergence." In it, Buchanan explains how social order emerges from the process of voluntary trade. He demolishes the method of many analysts who evaluate social outcomes with reference to what a benevolent planner might do if he or she had all of the relevant information:

I want to argue that the "order" of the market emerges only from the process of voluntary exchange among the participating individuals. The "order" is, itself, defined as the outcome of the process that generates it. The "it," the allocation-distribution result, does not, and cannot, exist independently of the trading process. Absent this process, there is and can be no "order."

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Individuals do not act so as to maximize utilities described in independently existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post(after the choices), in terms of "as if" functions that are maximized. But these "as if" functions are, themselves, generated in the choosing process, not separately from such process. If viewed in this perspective, there is no means by which even the most idealized omniscient designer could duplicate the results of voluntary interchange. The potential participants do not know until they enter the process what their own choices will be. From this it follows that it is logically impossible for an omniscient designer to know, unless, of course, we are to preclude individual freedom of will.

As Buchanan notes, economists and others err when they view the market process as one among many possible routes to efficient social ends. He teaches a powerful lesson: we literally don't know what we are doing when we use force to restrict others' options.

Buchanan's ideas have been relatively well-received: he had a Nobel Prize, after all. However, his ideas are still well outside the intellectual mainstream. Buchanan, though, was the model of a patient and enlightened scholar. He wrote for the ages, and I've heard that he would ask young scholars questions like "what are you working on that people will be reading in 100 years?" I've taken to asking questions like these of the students I encounter, and I try to ask it of myself on a regular basis to make sure I don't lose sight of what really matters. Buchanan succeeded: scholars will still be reading his work a century from now. And they will do so in a much better world than would have existed had Buchanan not been here.